MBIA (MBI) Affirms Entering MBS Settlement with BofA (BAC)

MBIA Inc. (NYSE: MBI) (the Company) today announced that it has, together with its subsidiaries MBIA Insurance Corporation (MBIA Corp.) and National Public Finance Guarantee Corporation (National), agreed to the terms of a comprehensive settlement agreement and related agreements (the Settlement Agreement) with Bank of America Corporation (NYSE: BAC) and certain of its subsidiaries (Bank of America). Under the terms of the Settlement Agreement, MBIA Corp. will receive a net payment of approximately $1.7 billion, consisting of approximately $1.6 billion in cash and $137 million principal amount of MBIA Inc.’s 5.70% Senior Notes due 2034. In exchange for the $1.7 billion net payment, MBIA Corp. will dismiss the litigation commenced in September 2008 against Countrywide Home Loans, Inc. (Countrywide), among other parties, and later amended to include claims against Bank of America, relating to breaches of representations and warranties on certain MBIA-insured securitizations sponsored by Countrywide. Bank of America and MBIA have also agreed to the commutation of all of the MBIA Corp. policies held by Bank of America, which have a notional insured amount of approximately $7.4 billion, and of which $6.1 billion are policies insuring credit default swaps held by Bank of America referencing commercial real estate exposures. MBIA Corp. will have no further payment obligations under the commuted policies. The Settlement Agreement requires certain approvals of the New York State Department of Financial Services, which are expected to be received shortly, at which point the parties will execute the agreements and promptly close all contemplated transactions described herein.

“We are very pleased to have reached a comprehensive settlement agreement with Bank of America that improves the outlook for MBIA Insurance Corp. and sets the stage for National to reclaim its leadership position in the U.S. public finance insurance market,” said Jay Brown, MBIA CEO. “I appreciate Bank of America’s efforts to arrive at a fair agreement that resolves a number of legacy issues for both institutions as well as the assistance provided by Superintendent Lawsky and the New York State Department of Financial Services. While work remains to be done, today’s announcement represents a significant milestone in MBIA’s Transformation for the future and toward our goal of resuming growth in shareholder value.”

Under the terms of the Settlement Agreement, Bank of America will receive five-year warrants to purchase 9.94 million shares of MBIA common stock at a price of $9.59 per share. Bank of America also agreed to dismiss its claims in the pending litigation concerning the restructuring transactions announced by MBIA on February 18, 2009 (the Transformation) and the pending litigation between the parties concerning the senior debt Consent Solicitation completed by MBIA in the fourth quarter of 2012. In addition, Bank of America agreed to withdraw the purported “notice of default” it sent in connection with the Consent Solicitation.

MBIA Corp.’s policies insuring the residential mortgage-backed securities (RMBS) transactions originated by Countrywide will continue to be in full force and effect, and MBIA Corp. will continue to make timely payment of principal and interest when due under these policies. Bank of America will have no further put-back liability to MBIA with respect to the insured Countrywide transactions.

In addition, MBIA Corp. has entered into a $500 million three-year secured revolving credit agreement with Bank of America, which MBIA Corp. may use for general corporate purposes. Borrowings under the agreement will be secured by a pledge of the collateral that secured the National loan to MBIA Corp. and by MBIA Corp.’s equity interest in its wholly-owned subsidiary, MBIA UK (Holdings) Limited.

The payment from Bank of America, including the MBIA Inc. bonds, will be used to repay the remaining outstanding balance and accrued interest on MBIA Corp.’s secured loan from National in accordance with its terms. The secured loan balance of approximately $1.7 billion as of April 1, 2013 had been reduced to approximately $1.6 billion as a result of the receipt of $110 million on May 2, 2013 in settlement of representation and warranty related litigation with Flagstar Bank.

The value of the settlement is consistent with amounts recorded to MBIA Corp.’s statutory balance sheet at year-end 2012. However, the settlement substantially improved its liquidity and capital risk profile by eliminating potentially substantial near-term payment obligations and $7.4 billion of insured exposure, providing funds for the repayment of the secured loan from National and making a $500 million secured loan facility available for general corporate purposes.

The Blackstone Group served as financial advisor to the Company in connection with the settlement.

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